Why I oppose layoffs.

 There may be a recession sometime in the next year. There again, there may not be. It is interesting to examine how the different economic classes will react. 

Let us examine the ‘plight’ of the wealthy, those with significant means. Let me remind you how they managed during the Covid recession. Research suggests that in the 48 weeks from March 2020 to February 2021, a period during which millions were suspended from work, the wealth of the wealthiest increased by over 40%, over $1.3 trillion. (COVID-19 has made the super-rich richer. It is time for a billionaire wealth tax - Resilience) The impact might have been different in the ensuing months but no, luxury items continued to be purchased in record amounts. You need only look to premium auto sales (Lamborghini and Bentley rack up record sales in 2022 - Autoblog) or haute couture (New record year for LVMH in 2022 - LVMH) 

It is fair to say that the wealthy do not have any appreciation of a recession. Preparation is limited to ensuring that the wine cellars are fully stocked and that the private planes are fueled and ready to head to a warmer destination. 

And in case there is any concern about cash flow, they can always rely on Boards of Directors such as that at Chevron who chose to authorize a stock buyback worth $75 billion to support the stock price rather than issue a special dividend which might have tax implications. It is good to have friends in high places... 

Consider the plight of the poor. These folks rely on government assistance for much of their income, as spartan as it may be. Most who are employed work for minimum wage in service or hospitality sectors and visit food banks for supplemental assistance. In the event of a recession, they are the ones most likely to be ignored or forgotten. They fly under the radar economically. They have no friends in high places. A recession has the potential to make life more difficult but when you are functioning at that level most of the time anyway, it becomes worse only by degree. What is one more can of water to the soup that is already diluted... 

  

That leaves us with the middle class. They are the ones with the target on their back during every recession. The typical remedy has been to initiate layoffs. And it is such a waste of time...resources...and emotion. Layoffs are simply an admission of lazy and lousy leadership. I call it the ‘chicken little syndrome’. 

To fully understand why I make this comment, consider the following: 

 

• Recessions are a normal part of the economic cycle. Since 1950 we have had anywhere from 11-13 depending upon the definition you choose.  

• Recessions last on average about 10 months. They are a result of war, disease, or greed. The true impact on GDP has been a decline in the range of 2-3%. As often as not, we have already started to come out of a recession just after economists declare us to have been in one. 

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• Look at any graph showing GDP growth over the past 75 years, and you will notice one thing...the graph always continues to move up after short and nominal periods of decline. 

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It begs the question ‘...why do we overreact to the normal cycle of business and worsen a situation that is going to correct itself in the near future?’  The answer is simple. To appease the wealth holders, those who own the stocks, leaders have been conditioned to conduct knee-jerk reactions to imply that they are on top of the situation and doing what is necessary to protect share value. As I have already noted, layoffs are the remedy of lazy and lousy leadership. And the wealthy do not need to be pandered to, they are doing just fine thank you. 

Layoffs are costly; they undermine employee morale; they are insensitive to the fact that you are burning an asset that will be needed again in the future and which will cost more than you have saved once you factor in the recruitment and training costs and the erosion of trust among those who remain. 

Is there ever a time when layoffs are necessary? Absolutely! They are a tool to use when a business faces fundamental challenges in their marketplace and for which the future is decidedly uncertain. A recession is not an indication of this situation. 

 

We are always in uncharted territory. No one knows the future and we are all in a reactionary mode. That said, we do have some certainties. 

 

• Every day in North America there are about 11,000 baby boomers turning age 65, the traditional age of retirement. This has been happening for over a decade and will continue through this decade. We have an exodus of high wage earners and a knowledge base that we need to transition.  

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• Demographics will play an increasingly vital role in economic growth. Countries like Japan have already come to the tipping point caused by low birth rates and restrictive immigration policies. China is about to feel the impact of decades of selective birth rates both in terms of numbers of people and of gender. And because no one has yet been able to figure out how to reduce the length of a pregnancy, these issues will not go away quickly. 

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• People have always been the primary differentiator between the best companies. Ideas can be copied quickly, and regulators hate monopolies so there are few lasting advantages associated with technology. 

 

As you assess your response to the potential or reality of a recession, what will be foremost in your mind. Will you retain your most critical assets and be able to capitalize on the opportunities that a rebounding economy presents? Or will you succumb to the tried and true – and failed – approaches of the past? I wish you the best in your decision.  

Layoffs...really?

 

 

The recent news has brought a flurry of layoff notices, especially in the tech sector. Companies such as Google, MicroSoft, Amazon, Salesforce, Meta, Shopify and Netflix have all announced layoffs of up to 10% of their workforce.  These decisions are not made without significant financial implications but are generally meant to signal to a specific segment of the population, the investment community, that management is actively addressing potential problems.  They want to be seen as anticipating business downturns rather than reacting to them.  But a careful examination of the facts suggests otherwise. 

I will use MicroSoft as an example, but it is applicable to many of the others as well. 

Any announcement of layoffs is regarded negatively by people inside and outside the company.  So how could this notice have been handled differently?  Here are a few observations. 

1. According to Mercer, one of the world’s largest consulting firms specializing in HR, the average personnel turnover is about 20%.  Statistically MicroSoft could adjust their workforce within six months simply through disciplined hiring. 

2. 
   

2. MicroSoft is taking a $1.2 billion expense to cover the severance costs.  That equates to $120,000 per person.  Why not make an announcement that says something like “...MicroSoft today announced that they are investing over $100,000 per person in the employment future of up to 10,000 employees...”.  The bottom line is the same, but the messaging is entirely positive. 

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3.  About the same time as the layoff announcement was made, MicroSoft also had Sting perform a private concert in Davos for about 50 key personnel and then a few days later announced an investment of up to $10 billion for a stake in ChatGPT. This clearly demonstrates that the layoffs were not inspired by financial pressures but rather to clean up some poor business decisions, aka, skeletons in the closet. 

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4.  Layoffs are announced by executives, people who never get their hands dirty at these events.  No, the axe gets handed to mostly middle managers and others in HR, who routinely engage an outplacement firm to further distance themselves from the actual message. Executives typically are cowards when it comes to enacting the decisions.  It is a skill many have mastered by avoiding responsibility while climbing on the efforts of others to their positions of authority... 

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Expedience should not be seen as the panacea for poor decisions of the past nor the fear of future events. Recessions come and go; they are part of the business cycle. But they seldom last more than a few months and are almost past before economists declare them to have occurred. My advice is to run your business with compassion, intelligence, integrity and passion. If you only pander to investors, who have an audience of one, your decisions will be shortsighted and more often detrimental to your long-term health. 

Leadership in the 21st Century

 

For the past 13 years I have been writing about leadership and the challenges we face in the void of leaders across the many sectors of our society.

Over the past month I have spent time consolidating many of those thoughts into a document that expresses my thoughts and experiences.

As it is too large to post, I am making it available to interested parties simply by contacting me directly at jbbrown@telus.net

The document is not large, about 85KB, and 5500 words.  I look forward to hearing from you and sharing my work at no charge to you.  Please know that no data will be retained and nor used for any other purposes.

All the best for 2023!

James Brown

The difference between power and authority!

 

In April 1887, the British historian Lord Acton wrote to Bishop Creighton observing ‘…power tends to corrupt; absolute power corrupts absolutely…’

I have been reflecting on this statement and have come to the conclusion that ‘power’ has nothing to do with leadership.  Please allow me to explain.

Leaders are put into place in all aspects of our society.  Business, politics and religion are just some examples.  In every instance there is either an explicit or an implicit understanding among all parties.  Specifically, the leader is granted both the responsibility and the authority to carry out a clearly defined mandate.  At the same time, the third leg of this agreement holds the leader to account for their actions and their results. This third component is as important to the equation as the two former aspects for without accountability we have no way to judge performance.

However, some ‘leaders’ believe that they deserve certain entitlements above and beyond that which was intended in their appointment.  These individuals seek not leadership’s authority but power because, in their determination, power allows them to amend the bounds ascribed in the ‘responsibility and authority’ elements and to ignore the accountability entirely. They desire unilateral freedom to operate as they choose without any of the normal checks and balances.

We have all had our personal examples of situations where this has played out.  In these instances you must run, not walk, away as quickly and as far as possible.

Typically these people are incorrigible.  And more so, they are dangerous. They are often sociopathic and narcissistic in spite of their apparent charm and appearance. Power is addictive and generally self destructive.

The world has several of these types operating politically; Russia, North Korea and China obvious examples.  These are the most notorious because they are the most visible.  But do not be deceived, countless others lurk in the shadows.

Religion has offered us far too many examples as well.  You need to be in those circles to recognize the names. But be assured that power has been exploited far more frequently than one might imagine.

We have seen power play out in business as well.  The tech world offers several current examples.  The landscape is littered with so many others – think Nortel and Enron to get you started.

In all of these examples, individuals sought power to broaden the scope of their influence and/or abuse the influence that they were granted.  They expected, without justification, that they would not have to face scrutiny because they were self-diluted to believe that the rules did not apply to them.

These people are not leaders. They are abusers.

Authentic leaders achieve through the efforts of those they lead and they recognize those contributions. These impostors seek only recognition for themselves through deceit, deception and defamatory behaviour.

Lord Acton was right in 1887.  The past 135 years have done nothing to dispel his assertions. 

Hopefully we can all learn from history!

Finding a leader...or building a team?

 

 

For too long selecting a leader was essentially ‘who’s next in line’.  The attitude was that if you were good at doing your job you should be good at leading others in the same department or division.  Unsurprisingly, this rather cavalier method often led to disastrous results.

In my opinion the search for leaders and, by extension, for team members should follow the “Principle of Three C’s”.  These C’s are listed in order of importance.

C1 is character.

A leader must be one whose moral, ethical and legal ‘compass’ is properly aligned to integrity.  After all, this individual sets the standards and expectations for everyone in their scope of supervision.  And depending upon the level of responsibility associated with the role, this person may also be demonstrating those standards internally to others outside their direct scope and externally to clients and suppliers. Someone lacking character will not attract others who have it.  Furthermore someone lacking character will not be supported by those whom they expect to influence.  In short, an absence of character will directly lead to failure, sooner than later!

C2 is chemistry.

Leaders seldom accomplish something by themselves.  Rather they rely on the collective efforts of all the team members.  If there are members whose attitudes and behavior are disruptive to the overall chemistry of the team, it will be a constant uphill battle to accomplish the goals set out. I’m not suggesting a team of clones, but there must be a collective understanding that every member is there to contribute to the overall good by maximizing their own contributions.  Think of it like a rowing crew of 8.  When everyone is pulling in the same direction the boat literally flies across the surface of the water.  But when one oar is disengaged, the boat struggles to stay on course.  Success is a function of the sum of the efforts and chemistry – the shared belief in the values and the objective- makes this possible.

C3 is competence.

Many believe that this should be the most important.  I believe that an absence of C1 and/or C2 demonstrates a lack of competence to begin with. If we assert that an ability to ‘do’ leads naturally to an ability to ‘lead’ then we have a fundamental misunderstanding of leadership.  Clearly some functions need at least some measure of competency.  No one leads a team of lawyers without knowledge of the law.  Nor does one lead a team of medical professionals without a foundation of health care.  But does a hospital need a doctor to lead, or someone with a broad understanding of the delivery of health services.  I submit that it is the latter.

Whether selecting a leader or building a team, these principles should be your ‘North Star’ in guiding you to the best candidates.

Remember this truth... ‘Reputation is what others think of you, character is who you really are…’

Starting there sets you on a solid foundation for success!

Let's talk 'cost of living'

 

Across the news we are hearing the constant beat of the drums complaining about the cost of living.  I don’t mean to diminish those realities, but let’s have some perspective. 

Here are two examples and two of my heroes.

 

Cecil Thomas Brown, my father, was a teenager growing up during the Great Depression and then enlisted in the RCAF and served until war’s end in 1945.  He didn’t know where his next meal would come from or if he would live through the war.  His ‘cost of living’ was to sacrifice his youth and early manhood to serve all of us.

Barclay Newsome, whose name I proudly share, was Cecil’s best friend.  He too grew up through the Great Depression and enlisted with Cec in the RCAF.  As the picture notes, his ‘cost of living’ was a hell of a lot more than a few more dollars at the gas pump.

At this time of year, I am reminded of these two heroes and the thousands…nay millions…whose cost of living is something most of us can never measure.

Thanks boys, we owe you one!

Silence is not an alibi for accountability!

 

We live in a world where too often opinions are shaped by the pronouncements of the most radical in our society, whether that comes from the right or the left of the spectrum.  Unfortunately these pronouncements are, more often than not, short on truth but long on volume.  We are wise to remember the words of Daniel Patrick Moynihan who stated years ago ‘…you are entitled to your own opinions.  But you are not entitled to your own facts…’

It concerns me that too many leaders are not engaging in this dialogue.  One does not have to be politically motivated to speak out and challenge the lies and half-truths that are advanced; nor does one need to be adept on social media platforms.  NO, one simply needs to speak out and accept the responsibility that comes with a position of leadership. No forum is too small or too large to advance the truth.  Ultimately your silence is not an alibi for the accountability that comes with your position.

‘Ah’ says the silent one.  ‘I am only trying to be tolerant of others opinions’. 

Well here’s the reality.  The opposite of tolerance is not intolerance.  It is INDIFFERENCE.   If you sat in a bar and watched as someone drank themselves into insobriety you could claim that you were being tolerant of their choices.  But if that same person then left the bar and was involved in a fatal car crash was it due to your tolerance of drinking or your indifference.  When you had the opportunity to make a difference based on the facts…and you chose not to…that’s on YOU!

Leadership demands that we stand for what is right and call out that which is wrong.  You are not doing it because of what it will benefit you in the opinion of others.  Your motivation must be entirely altruistic. 

Too many have for too long simply sat on their hands and chosen not to be counted.  Those who fade to black when given the opportunity to shine are not worthy of the call to lead.

We are at a crossroads where we must be championed by the character of our leaders.  Embracing the MORAL…ETHICAL…and LEGAL priorities upon which we founded our cultures, and which are now most under attack, is the path forward.  Our failure to do so will only lead to the disintegration that is happening now.

Silence is not an alibi for accountability…and truth needs no alibi!